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1996 10 09 IABT0 0 aj 4tit 4 sep Qumra 78-495 CALLE TAMPICO - LA QUINTA, CALIFORNIA 92253 - (619) 777-7000 FAX (619) 777-7101 AGENDA INVESTMENT ADVISORY BOARD Study Session Room 78-495 Calle Tampico- La Quinta, CA 92253 October 9, 1996 - 5:30 P.M. I CALL TO ORDER a. Pledge of Allegiance b. Roll Call II CONFIRMATION OF AGENDA III PUBLIC COMMENT - (This is the time set aside for public comment on any matter not scheduled on the agenda.) IV CONSENT CALENDAR A. Approval of Minutes of Meeting on September 11, 1996 for the Investment Advisory Board. V BUSINESS SESSION A. Transmittal of Treasury Report for August, 1996 B. Proposed Change in Bond Trustee from Wells Fargo to First Trust C. Workplan for Fiscal Year 1996/97 D. Investment Policy Update VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - September 1996 B. Treasurer's Office Procedures VII BOARD MEMBER ITEMS VIII ADJOURNMENT MAILING ADDRESS - P.O. BOX 1504 - LA QUINTA, CALIFORNIA 92253 Gz v � .Ok y CF `lw+ OF TNT INVESTMENT ADVISORY BOARD Meeting Date: TITLE: October 9, 1996 Transmittal of Treasury Report for August 31, 1996 BACKGROUND: Business Session Item No. A Attached please find the Treasury Report for August 31, 1996. The report includes the modifications recommended at the September Meeting (LAIF fees and re- ordering the Accrued interest and Gain/Loss column). RECOMMENDATION: Review, Receive and File the Treasury Report of August 31, 1996. M. Falcone , Finance Director TO: FROM: SUBJECT: DATE: T 0 Iry 4hf 4 QgmrA MEMORANDUM La Quinta City Council John Falconer, Finance Director/Treasurer Treasurer's Report for August 31, 1996 October 3, 1996 Attached is the Treasurer's Report for the month ending August 31, 1996. This report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Department. Cash and Investments: Increase of $3,554,290. due to the net effect of revenue in excess of expenditures. State Pool: ICMA: Decrease of $3,479,999. due to the net effect of transfers to and from the cash and investment accounts. Increase of $29,162. due to interest earned. U.S. Treasury Bills: Increase of $31,180. due to the net purchase of 1 Treasury Note and the sale of 1 U.S. Treasury Bill. Mutual Funds: Decrease of $746,355. due to the net affect of withdrawal from the 95 Series Proceed Fund and interest earned. Total decrease in cash balances $611,722. I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Wall Street Journal and Wells Fargo Monthly Custodian Report to determine the fair market value of investments at month end. Jdhn M. 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F 7 CITY OF LA QUINTA BALANCE SHEET 08/31/96 - CITY ASSETS: POOLED CASH 3,661,516.39 INVESTMENT T-BILL 9,866,027.78 PREMIUM/DISCOUNT ON INVESTMENT 32,226.56 LQHP CASH BOND REDEMPTION CASH BOND RESERVE CASH BOND PROJECT CASH BOND ESCROW CASH PETTY CASH 1,000.00 ICMA DEFERRED COMPENSATION 561,248.30 CASH & INVESTMENT TOTAL 14,122,019.03 ACCOUNTS RECEIVABLE 8,608.75 INTEREST RECEIVABLE 100,679.35 LOAN/NOTES RECEIVABLE DUE FROM OTHER AGENCIES DUE FROM OTHER GOVERNMENTS DUE FROM OTHER FUNDS DUE FROM RDA 6,048,957.20 INTEREST ADVANCE -DUE FROM RDA 705,711.72 NSF CHECKS RECEIVABLE 1,413.84 ACCRUED REVENUE TRAVEL ADVANCES 925.00 EMPLOYEE ADVANCES PREPAID EXPENSES 23,020.00 RECEIVABLE TOTAL 6,889,315.86 WORKER COMPENSATION DEPOSIT RENT DEPOSITS CITY CITY RDA RDA FA FIXED LONG TERM FIXED LONG TERM FINANCING LONG TERM GRAND ASSETS DEBT RDA ASSETS DEBT AUTHORITY DEBT TOTAL 10,039,967.08 13,701,483.47 9,866,027.78 32,226.56 66,715.73 66,715.73 1,316.09 15,460.31 16,776.40 394,446.78 703,815.57 1,098,262.35 13,140,059.02 13,140,059.02 10,237.44 10,237.44 1,000.00 561,248.30 23,652,742.14 719,275.88 38,494,037.05 68,871.23 77,479.98 100,679.35 95,445.00 95,445.00 551,038.04 551,038.04 6,048,957.20 705,711.72 1,413.84 925.00 250,014.50 273,034.50 965, 368.77 7,854,684.63 UTILITY DEPOSITS 75.00 75.00 MISC. DEPOSITS 2,100.00 2,100.00 DEPOSITS TOTAL 2,175.00 2,175.00 GENERAL FIXED ASSETS 15,981,208.00 11,526,745.05 27,507,953.05 AMOUNT AVAILABLE TO RETIRE L/T DEBT 2,340,653.00 2,340,653.00 AMOUNT TO BE PROVIDED FOR L/T DEBT 298,816.00 91,488,619.88 8,200,000.00 99,987,435.88 TOTAL OTHER ASSETS 15,981,208.00 298,816.00 11,526,745.05 93,829,272.88 8,200,000.00 129,836,041.93 TOTAL ASSETS 21 013,509.89 15 981,208.00 298,816.00 24 618 110.91 11 526,745.05 93,829,272.88 719 275.88 8,200,000.00 176 186,938.61 LIABILITY ACCOUNTS PAYABLE 165,432.00 DUE TO OTHER AGENCIES 51,972.68 DUE TO OTHER FUNDS INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES PAYROLL LIABILITIES 27,653.79 STRONG MOTION INSTRUMENTS 1,189.70 FRINGE TOED LIZARD FEES 82,417.40 SUSPENSE 1,132.47 DUE TO THE CITY OF LA QUINTA PAYABLES TOTAL 329,798.04 ENGINEERING TRUST DEPOSITS 73,388.76 SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS 96,725.33 LQHP DEPOSITS DEVELOPER DEPOSITS 147,449.71 MISC. DEPOSITS 1,605.00 AGENCY FUND DEPOSITS 1,612,885.54 ICMA-DEFERRED COMP DEPOSITS 561,248.30 TOTAL DEPOSITS 2,493,302.64 DEFERRED REVENUE OTHER LIABILITIES TOTAL COMPENSATED ABSENCES PAYABLE DUE TO THE CITY OF LA QUINTA NOTE DUE TO MURPHY, DALES, LANE DUE TO COUNTY OF RIVERSIDE DUE TO C.V. UNIFIED SCHOOL DISTRICT DUE TO DESERT SANDS SCHOOL DISTRIC BONDS PAYABLE TOTAL LONG TERM DEBT TOTAL LIABILITY 2,823,100.68 EQUITY -FUND BALANCE TOTAL LIABILITY & EQUITY 18,190,409.21 15,981,208.00 350,760.03 516,192.03 51,972.68 551,038.04 551,038.04 27,653.79 1,189.70 82,417.40 1,132.47 901,798.07 1,231, 596.11 73, 388.76 96,725.33 14,242.00 14,242.00 147,449.71 1,605.00 1,612, 885.54 561,248.30 14,242.00 2,507,544.64 298,816.00 298,816.00 6,754,670.13 6,754,670.13 11,925,575.00 11,925, 575.00 11,797,367.75 11, 797, 367.75 1,276,660.00 1,276,660.00 62,075,000.00 8,200,000.00 70,275,000.00 298,816.00 93,829,272.88 8,200,000.00 102,328,088.88 298,816.00 916,040.07 93,829,272.88 8,200,000.00 106,067,229.63 23,702,070.84 11,526,745.05 719,275.88 70,119,708.98 21 013 509.89 15 981 208.00 298,816.00 24 618 110.91 11 526 745.05 93,829,272.88 719,275.88 8,200,000.00 176,186 938.61 / oZ V � `y of CNti INVESTMENT ADVISORY BOARD Meeting Date: October 9, 1996 TITLE: Proposed Change in Bond Trustee from Wells Fargo to First Trust BACKGROUND: Business Session Item B Staff is proposing a change in the Bond Trustee for the 1992 and 1995 RDA Bond issues listed on page 19 of the City Investment Policies for the following reasons: 1. Lower annual cost (Attachment No. 1); 2. Better service from First Trust. RECOMMENDATION: If adopted by the City Council, Staffs request to such a change to First Trust would be subject to consent by MBIA who insured the bond. Staff is not anticipating MBIA disapproval. ohn M. Falconer, Finance Director T 0 0 4t!t 4 4a a9mm MEMORANDUM TO: John M. Falconer, Finance Director FROM: Geniene D. Croft, Financial Services Assistant DATE: September 17, 1996 SUBJECT: First Trust versus First Interstate Bank Trustee Fees I have completed an analysis and comparison of the Trustee fees between First Trust of California and First Interstate Bank (attached). The potential annual savings of administration fees by transferring the 95 Housing TAB to First Trust is $2,500.00. This savings will vary somewhat depending on the amount of activity that occurs within the accounts. The potential annual savings of adminstration fees by transferring the 92 Refunding TAB is $1,700.00. Again, the saving will vary somewhat as the analysis does not include the escrow fees which will be incurred when the 92 TAB is refunded. The amount of activity that occurs within the accounts will also impact the savings. It is my recommendation to transfer the Trustee accounts (92 TAB and 95 Housing Tab) that we now have with First Interstate Bank to First Trust of California. The amount of money the City will save annually is significant. Our administration of the trustee will be enhanced as we will be dealing with only one Trustee instead of two. Additionally, First Trust of California has historically provided us with outstanding customer service. _ COMPARISON OF TRUSTEE FEES 95 HOUSING TAX ALLOCATION BOND FIRST FIRST TYPE OF SERVICE TRUST INTERSTATE ACCEPTANCE FEE 250.00 1,200.00 ANNUAL ADMINISTRATION 1,000.00 2,500.00 ANNUAL DISSEMINATION 500.00 1,500.00 INVESTMENT PER TRANSACTION* 75.00 35.00 SUBSEQUENT REINVESTMENT 75.00 0.00 OUTGOING WIRE OR INTERBRANCH 25.00 25.00 CHECK AGNST TRUST ACCOUNT 0.00 25.00 WIRE AGAINST TRUST ACCOUNT 0.00 50.00 OUT OF POCKET ** 0.00 0.00 $1,925.00 $5,335.00 ADDITIONAL FEE CERTIFICATES ISSUED 0.00 3.00 REGISTERED SECURITY PER ACCT 0.00 5.00 REPURCHASE PER TRANSACTION 0.00 50.00 LETTER OF CREDIT PER DRAW 0.00 100.00 EACH REDEMPTION PROCESSED 0.00 500.00 TERMINATION FEE 0.00 250.00 REBATE CALCULATION ENGAGMNT 0.00 500.00 REBATE CALCULATION 0.00 2,000.00 * FIRST TRUST PURCHASE OF INVESTMENTS FEE OF $75.00 IS IN EXCESS OF TRANSACTIONS ** OUT-OF-POCKET EXPENSE FOR FIRST TRUST IF 5% OF ANNUAL ADMN FEE. OTHER OUT-OF-POCKET EXPENSE WILL BE AT COST. OUT-OF-POCKET EXPENSE FOR FIRST INTERSTATE IS 6% OF BILLED FEE. NOTE: FOR FIRST TRUST, THE ACCEPTANCE FEE AND ANNUAL ADMINISTRATION FEE APPLY TO EACH ESCROW ACCOUNT ESTABLISHED TO DEFEASE A PRIOR ISSUE OF BONDS/NOTES. ALL TRANSACTION CHARGES AND OUT-OF-POCKET EXPENSES ASSOCIATED WITH REGISTRAR AND PAYING AGENT SERVICES FOR THE ISSUE BEING DEFEASED WILL REMAIN IN EFFECT UNTIL THE BONDS/NOTES ARE PAID IN FULL AT MATURITY OF PRIOR REDEMPTION. ADDITIONALLY THERE WILL BE A CHARGE OF $250.00 IF THE ESCROW AGENT IS REQUIRED TO PROVIDE A LEGAL OPINION. 10 ALL SEP-13-1996 10:00 FIRST TRUST CA 213 533 8736 P.08/11 ACCEPTANCE FEE. Payable at closing, a one-time charge covering review of documents by administration and legal counsel, and liaison with underwriter, issuer and attorneys. If the transaction Is more Complex than anticipated, or if draft documents are not provided in a timely manner, there may be an additional Charge. ANNUAL ADMINISTRATION FEE: $11,000•00 Covers ordinary duties and responsibilities per annum or portion thereof. Payable annually in advance. INITIAL PURCHASE OF INVESTMENTS: In excess of 10 transactions, each: $76.00 SUBSEQUENT REINVESTMENT: If applicable, per tran saction: \ $75.00 MATURITIES: NO CHARGE TRANSACTION CHARGES: $25.00 Wire Transfers, each: OUT-OF-POCKET EXPENSES: Miscellaneous expenses for phone, fax, messenger service, overnight mail, stationery, and postage (exclusive of large mailings) will be reimbursable in an amount equal to 5% of annual administration fee. All other out-of-pocket expenses incurred in connection with the performance of ordinary services will be reimbursable at cost. EXTRAORDINARY SERVICES AND EXPENSES: Reasonable compensation will be charged and all out-of-pocket expenses will be reimbursed in connection with Extraordinary Services and Expenses not covered herein. NOTE: The acceptance fee and annual administration fee apply to each Escrow Account established to defe®se a prior issue of bonds/notes. Please note that all transaction charges and out-of-pocket expenses asaociated with Registrar and Paying Agent services for the issue being defeased will remain in effect until the bonds/notes are paid in full at maturity or prior redemption. In addition, there will be a charge of $250.00 if the Escrow Agent is required to provide a legal opinion. DATED: September 13, 1996 CONFIDENTIAL La Quinta Redevelopment 2 In addition to our standard monthly reporting package, First Interstate Bank is pleased to offer at a minimal additional charge, direct, real time, on-line access to our Trust Accounting System, which tracks all of your trust assets and the movement of funds. This "On -Line Information Exchange" feature is unique to First Interstate Bank and provides you a user friendly dial -up system, through the use of a variety of communications software packages and your IBM compatiblepersonal computer and modem. You will find with "On -Line" you have immediate access to your cash and asset balances, transaction detail or summary reports and anticipated cash balances, along with all other reports available through our trust accounting application. Acceptance Fee This one-time charge includes acceptance of the account, review of the trustee agreement and supporting documents, initial investment advisory services, liaison with agency officials, counsel and underwriters and attendance at the closing by your First Interstate Bank Account Administrator. First Interstate Bank will bill separately, at our cost, for legal fees incurred in this transaction. Should documents be clearly drafted to the standards of First Interstate's counsel, such legal fees would be capped at $2,000. Acceptance Fee $1,200 Annual Administration Fee This annual fee covers those duties for the ordinary requirements of the administration of your account in the Bank's capacity as Trustee. Annual Administration Fee $2,500 Annual Fee for Acting as Dissemination Agent Under Continuing Disclosure Agreement $1,500 (minimum) At closing, fees for the following services are due and payable: a) Acceptance Fee, b) Annual Administration Fee for the first year, c) Trustee Counsel Fees and d) Annual Dissemination Agent Fee for the first year. La Quinta Redevelopment 3 Thereafter, our Annual Administration Fee will be payable in advance for said period, or any portion thereof, at the beginning of each annual period commencing with the first anniversary of the closing. Certificate transaction fees M will be waived if the issue is in book entry. Transactions Fees #Certificates issued, per certificate $3.00 #Registered securityholder accounts maintained, per account, \ per annum (includes interest checks issued) $5.00 #Certificates paid, per certificate �$3.50* *($100.00 minimum per Debt Service Period) Investments, per transaction \° $35.00 Outgoing wire or interbranch transfer of funds, per transaction $25.00 Repurchase agreements, per transaction $50.00 Payment of requisition against trust accounts, per check '\'$25.00 Per wire \$50.00 Letter of credit draws, per draw $100.00 Redemptions processed, per redemption *($500.00 minimum) $500.00* Termination Fee $250.00 Rebate Calculation Fees (optional) Engagement fee (one time fee only) $500.00 Report fee (per report) $2,000.00* * Computation period in excess of 18 months $500 per additional year or fraction thereof COMPARISON OF TRUSTEE FEES 92 REFUNDING TAX_ ALLOCATION BOND FIRST FIRST TYPE OF SERVICE TRUST INTERSTATE ACCEPTANCE FEE 1,500.00 1,500.00 TRUSTEE COUNSEL FEE 2,500.00 2,650.00 ANNUAL ADMINISTRATION 2,500.00 3,200.00 ANNUAL ESCROW FEE 0.00 1,200.00 ANNUAL DISSEMINATION 500.00 1,500.00 INVESTMENT PER TRANSACTION 75.00 0.00 SECURITY TRADE PER TRANSACTIONS 0.00 35.00 SECURITY TRADE PER REQUISITION/CHECK 0.00 25.00 SECURITY TRADE PER REQUISITION/WIRE 0.00 50.00 GUARANTEED INVST CNTRCT PER TRNS 25.00 0.00 OUTGOING WIRE -OR INTERBRANCH 25.00 0.00 $71125.00 $10,160.00 REGISTRAR/PAYING AGENT BOOK ENTRY SECURITY PER ANNUM 250.00 0.00 OUT-OF-POCKET EXPENSE** 0.00 0.00 COVERS INITIAL DOCUMENT REVIEW. NOT TO EXCEED $2,500.00. ** OUT-OF-POCKET EXPENSE FOR FIRST TRUST IF 5% OF ANNUAL ADMN FEE. ALL OTHER OUT-OF-POCKET EXPENSE WILL BE AT COST. OUT-OF-POCKET EXPENSE FOR FIRST INTERSTATE IS 6% OF BILLED FEE. COMPARISON OF TRUSTEE FEES 92 REFUNDING TAX ALLOCATION BOND FIRST FIRST TYPE OF SERVICE TRUST INTERSTATE ACCEPTANCE FEE 1,500.00 1,500.00 TRUSTEE COUNSEL FEE 2,500.00 2,650.00 ANNUAL ADMINISTRATION 2,500.00 3,200.00 ANNUAL ESCROW FEE 0.00 1,200.00 ANNUAL DISSEMINATION 500.00 1,500.00 INVESTMENT PER TRANSACTION 75.00 0.00 SECURITY TRADE PER TRANSACTIONS 0.00 35.00 SECURITY TRADE PER REQUISITION/CHECK 0.00 25.00 SECURITY TRADE PER REQUISITION/WIRE 0.00 50.00 GUARANTEED INVST CNTRCT PER TRNS 25.00 0.00 OUTGOING WIRE OR INTERBRANCH 25.00 0.00 $71125.00 $101160.00 REGISTRAR/PAYING AGENT BOOK ENTRY SECURITY PER ANNUM 250.00 0.00 OUT-OF-POCKET EXPENSE** 0.00 0.00 COVERS INITIAL DOCUMENT REVIEW. NOT TO EXCEED $2,500.00. ** OUT-OF-POCKET EXPENSE FOR FIRST TRUST IF 5% OF ANNUAL ADMN FEE. ALL OTHER OUT-OF-POCKET EXPENSE WILL BE AT COST. OUT-OF-POCKET EXPENSE FOR FIRST INTERSTATE IS 6% OF BILLED FEE. - SEP-13-1996 09:59 FIRST TRUST CA 213 533 8736 P.06/11 ' Sche�c7 - .`. . wr,+Nrr�l'.��Y.i•.q;. i w xrw;,,••;• , r. •.�...�:..'i.,,,',j'� ., .� T..4 FUN • ACCEPTANCE FEE: A one-time charge covering review of documents by administration and liaison with underwriter, issuer, and attorneys. Payable at closing. If the transaction is more complex than anticipated, or if draft documents are not provided in a timely manner, there may be an additional charge. Minimum Fee applies: $1,500.00 (Payable at closing per Indenture/Supplemental Indenture.) TRUSTEE COUNSEL FEES: $2,500.00 (Covers initial document review_ Not to exceed $2,500.00.) ANNUAL ADMINISTRATION FEE: $22500.00 (Covers ordinary duties and responsibilities. Payable annually in advance. Minimum annual fee per Indenture/Supplemental Indenture.) If an automated money market sweep vehicle is used, applicable fees would be assessed as disclosed in the fund prospectus and authorization form provided by your administrator. However, no transaction fee will be charged. Investments Directed Purchases/Sales, each transaction (includes collateral substitutions): $75.00 Guaranteed Investment Contracts, each transaction: $25.00 Transaction Charges for use of Sweep Vehicles: NOTE: There may be a charge when letters of credit are substituted, documents are supplemented or the account is terminated prior to maturity. REGISTRAR/PAYING AGENT SERVICES Book Entry Securities, per annum: $250.00 OUT-OF-POCKET EXPENSES: AT COST Miscellaneous expenses for phone, fax, messenger service, overnight mail, stationery, and postage (exclusive of large mailings) will be reimbursable in an amount equal to 5% of annual administration fee. All other out-of-pocket expenses incurred in connection with the performance of ordinary services will be reimbursable at cost_ EXTRAORDINARY SERVICES AND EXPENSES: SEP-13-1996 10:00 FIRST TRUST CA 213 533 8736 P.07/11 Reasonable compensation will be charged and all out-of-pocket expenses will be reimbursed in connection with Extraordinary Services and Expenses not covered herein. `Ordinary fees and expenses are subject to review and adjustment. DATED: September 13, 1996 CONFIDENTIAL First tntwetato Sank �+ Ins•.itv!ionw Tru-st, Division Dsp Arran; e76134 I a Los A.1getes, CA 9W88 Sank STATEMENT OF ACCOUNT LA QUINTA,RDV.AGCY.fA92 TX.ALLOC.BDS. C/O CITY OF LA QUINT' DATE: 78-105 CALLS ESTADO LA QUINTA, CA 92253 INVOICE: ATTN: TOM O'REILLY, FIN.DIR. PLEASE INCLUDE A COPY OF THIS STATEMENT WITH PAYMENT - 4,40 . BILLING CYC J F-ACC = 1,500.00 LA / DB TRUST 8116202 RE: $5,845,000 CITY OF LA QUYNTA REDEVELOPMENT AGENCY. REDEVELOPMENT pp oJECT AREA rio . 2 TAX ALLOCATION BONDS, ISSUE OF 1992 FEES RELATIVE TO FIRST INTERSTATE BANK ACTING AS TRUSTEE ACCEPTANCE FEE ANNUAL ADMINISTRATION FEE 12/92.- 12/93 ANNUAL ESCROW FEE 12/92 - 12/93 1.5%/Month FINP.NCE CHARGE on previous balance TOTAL FEES TOTAL EXPENSES TOTAL CURRENT CHARGES 12/16/92 14551 1,500.00 3,200.00 1,200.00 0.00 9Q0. b0 a We go the extra mile for)'Ou.' 16; : 4Y (76:14 014 440 1 4SEN LAW OFFICE ',UXr. l!CLJl 15 December 1992 First Interstate Bank of California corporate 'gust Department 707 Wilshire Blvd., W11-1 Los Angelas, CA 90017 220 BUSH STREET. 15TH FLO0P, SAN MANCISC O 9.1104- 3517 TELEPHONE (415) 986-6520 FACSIMILE (415) 986 - 6993 RE: La Quinta Redevelopment Agency La Quinta Redevelopment Project Area No. 2 Tax Allocation Bonds, Issue of 1992 *.'j uk.J , •iv•.' For legal services rendered in connection with the referenced issue: �a��Q•c9 pz U 44 OF TNti INVESTMENT ADVISORY BOARD Business Session Item C Meeting Date: October 9, 1996 TITLE: Workplan for Fiscal Year 1996/97 BACKGROUND: At the September 11, 1996 Investment Advisory Board Meeting the Board requested that Staff place an item on the agenda pertaining to reporting requirements to the Council. Attached please find as Attachment No. 1 the Ordinance creating the Investment Advisory Board. RECOMMENDATION: Staff has no recommendation on this item since the Board discussion on this item has not taken place. oh M. Falconer, Finance Director 2.70.010 Chapter 2.70 INVESTMENT ADVISORY BOARD Sections: 2.70.010 General rules regarding appointment and terms. 2.70.020 Board meetings and compensation. 2.70.030 Board functions. 2.70.010 General rules regarding appointment and terms. A. Except as set out below, see Chapter 2.06 for general provisions. B. The investment advisory board (the "board") is a standing board composed of seven members from the public that are appointed by city council. La Quinta residency is preferred, but not a requirement for board members. Recruitment for members may be advertised outside of the city. C. Background in the investment field and/or related experience is preferred. Background information will be requested and potential candidates must agree to a background check and verification. D. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in cwarrants, each board member will provide the city council with a disclosure statement which identifies any matters that have a bearing on the appropriateness of that member's service on the board. Such matters may include, but are not limited to, changes in employment, changes in residence or changes in clients, E. The board members will serve for two-year staggered terms beginning on July 1 st of every other year, commencing July 1, 1993. Initially, two members will be appointed for two-year terms and three members will be appointed for one-year terms. These initial appointments will start their yearly calculations from July 1, 1993. (Ord. 268 § 1, 1995; Ord. 222 (part), 1993) 2.70.020 Board meetings and compensation. A. Board members will be reimbursed for meeting and related expenses at an amount of fifty dollars per meeting. B. Initially, the board should meet once a month, but this schedule may be extended to quarterly meetings upon the concurrence of the board and the city council. The specific meeting dates will be determined by the board members and meetings may be called for on an as -needed basis. (Ord. 222 (part), 1993) 2.70.030 Board functions. A. The board will annually elect a chairperson and vice -chairperson at the first meeting held after each June 30th. B. The following are functions of the board that are to be addressed at each meeting: (1) review account statements and verifications to ensure accurate reporting as they relate to an investment activity; (2) monitor compliance with existing investZnerrt policy and pz�oc•,e;dures; and (3) review and make recommendations concerning investment policy and procedures, investment contracts, and investment consultants. C. The board will report to city council after each meeting either in person or through correspondence at a regular city council meeting. (Ord. 269 § 1, 195: Ord. 222 (part), 1993) 42-7 aA Qui= 2-9Q ORDINANCE NO. 268 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, AMENDING SECTION 2.70.010(B) OF THE LA QUINTA MUNICIPAL CODE RELATING TO THE INVESTMENT ADVISORY BOARD THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS: SECTION I. That Title 2, Chapter 2.70, Section 2.70.010(B) of the La Quinta Municipal Code is hereby amended to read as follows: "The investment advisory board (the "board") is a standing board composed of seven members from the public that are appointed by city council. La Quinta residency is preferred, but not a requirement for board members. Recruitment for members may be advertised outside of the city". SECTION II. EFFECTIVE DATE: This Ordinance shall be in full force and effect thirty (30) days after its adoption. SECTION III. POSTING:- The City Clerk shall within fifteen (15) days after passage of this Ordinance, cause it to be posted in at least three (3) public places designated by resolution of the City Council; shall certify to the adoption and posting of this Ordinance; and shall cause this Ordinance and its certification, together with proof of posting to be entered into the Book of Ordinances of the City of La Quinta. PASSED, APPROVED AND ADOPTED this 5TH day of July, 1995 by the following vote: AYES: Council Members Bangerter, Cathcart, Perkins, Sniff, Mayor Pena NOES: None ABSTAIN: None ABSENT: None JOHN J . ENA, ayor City of La Quinta, California ORDINANCE NO. 268 PAGE 2 IA EST: . . ald� SAUNDRA L. JUH , City Clerk City of La Quinta, California APPROVED AS TO FORM: . - X/0".Vd6o-1 k C DAWN HONEYWELL, City Attorney City of La Quinta, California STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE) ss. CITY OF LA QUINTA ) I, SAUNDRA L. JUHOLA, City Clerk of the City of La Quinta, California, do hereby certify the foregoing to be a full, true and correct copy of Ordinance No. 268 which was introduced on the 20th day of June, 1995 and was adopted at a regular meeting held on the 5th day of July, 1995 not being less than 5 days after date of introduction thereof. I further certify that the foregoing ordinance was posted in three (3) places within the City of La fi inta as specified in a resolution of the City Council. MUNDRA L. JUMLA, City -Clerk City of La Quinta, California DECLARATION OF POSTING I, S,AVNDRA L. JUHOLA, City Clerk of the City of La Quinta, California, do hereby certify th t 0 foregoing ordinance was posted on July 27, 1995 pursuant to City Council Resolution. SAUNDRA L. JUHOLA, City Clerk City of La Quinta, California ORDINANCE NO. 269 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, AMENDING SECTION 2.70.030 OF THE LA QUINTA MUNICIPAL CODE RELATING TO THE INVESTMENT ADVISORY BOARD THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS: SECTION I. That Chapter 2.70, Section 2.70.030 of the La Quinta Municipal code is hereby amended to read as follows: The Board will annually elect a Chairperson and Vice -Chairperson at the first meeting held after each June 30. The following are functions of the Board that are to be addressed at each meeting: (1) review account statements and verifications to ensure accurate reporting as they relate to an investment activity; (ii) monitor compliance with existing Investment policy and procedures; and (iii) review and make investment contracts, and investment consultants. The Board will report to City Council after each meeting either in person or through correspondence at a regular City Council meeting. SECTION II. EFFECTIVE DATE: This Ordinance shall be in full force and effect thirty (30) days after its adoption. SECTION III. POSTING: The City Clerk shall within fifteen (15) days after passage of this Ordinance, cause it to be posted in at least three (3) public places designated .by resolution of the City Council; shall certify to the adoption and posting of this Ordinance; and shall cause this Ordinance and its certification, together with proof of posting to be entered into the Book of Ordinance of the City of La Quinta. votes: PASSED, APPROVED AND ADOPTED this 18th day of July,1995 by the following AYES: Council Members Bangerter, Cathcart, Perkins, Sniff, Mayor Pena NOES: None ABSTAIN: None ABSENT: None Ordinance No. 269 Page 2 Fm 2A9 SAUNDRA L. JUHOYA, City Clerk City of La Quinta, Califomia APPROVED AS TO FORM: Aud'o%of -.d L-?� 1,0/6 DAWN HONEYWELL, lCity Attorney City of La Quinta, California Pat JOHN J. IYERA, M or City of La Quinta, California STATE OF CALIFORNIA ) COUNTY OF. RIVERSIDE) ss. CITY OF LA QUINTA ) I, SAUNDRA L. JUHOLA, City Clerk of the City of La Quinta, California, do hereby certify the foregoing to be a full, true and correct copy of Ordinance No. 269 which was introduced on the 5th day of July, 1995 and was adopted at a regular meeting held on the 5th day of July, 1995 not being less than 5 days after date of introduction thereof. I er certify that the foregoing ordinance was posted in three (3) places within the City of Uinta as specified in a resolution of the City Council. SAUNDRA L. JUHOLA, City Clerk City of La Quinta, California DECLARATION OF POSTING I, SAUNDRA L. JUHOLA, City Clerk of the City of La Quinta, California, do hereby certify tha a foregoing ordinance was posted on August 11, 1995 pursuant to City Council R solution. SAUNDRA L. JUHOLA, City Clerk City of La Quinta, California v Qum& OF TNT INVESTMENT ADVISORY BOARD Business Session Item D Meeting Date: October 9, 1996 TITLE: Investment Policy Update BACKGROUND: Staff has attached a copy of the Investment Policies with proposed Staff revisions which are as follows: Page 10 Correct typographically error Page 13 Correct City Ordinance Page 15 Propose increase in Money Market Government Security Mutual funds from 15% to 20% in accordance with recently adopted State Legislation. Page 16 Correct City Ordinance Page 19 Change institution names based upon merger and add broker/dealers Staff has not proposed a change in the LAIF percentages of 50% of the portfolio at this time. The August 1996 Treasury Report lists LAIF percentages of 27.49% of the portfolio and 33.73% of surplus funds. Attached please find an excerpt of the June 12, 1996 Business Session B - Consideration of approval of Investment Policy for the City of La Quinta with staffs position. Staff would request that the LAIF be addressed at the next revision which would be June 1997. At that time Staff will be better prepared with a more fully developed investment strategy. RECOMMENDATION: After the Investment Advisory Board has considered these revisions, a joint meeting with the City Manager and City Attorney will be scheduled in accordance with Sectio XX Jo n M. Falconer, Finance Director CITY OF LA QUINTA Investment Policy Table of Contents Section Topic Paae Executive Summary 2 I General Purpose 4 II Investment Policy 4 III Scope 4 IV Objectives 5 ► Safety ► Liquidity ► Yield V Prudence 6 VI Delegation of Authority 6 VII Conflict of Interest 7 VIII Authorized Financial Dealers and Institutions 7 ► Broker/Dealers ► Financial Institutions IX Authorized Investments and Diversification 9 X Investment Pools 9 XI Collateral ization 9 XII Safekeeping and Custody 10 XIII Interest Earning Distribution Policy 10 XIV Maximum Maturities 10 XV Internal Controls 10 XVI Benchmark 12 XVII Reporting Standards 12 XVIII Investment of Bond Proceeds 13 XIX Investment Advisory Board - City of La Quinta 13 XX Investment Policy Adoption 13 Appendices Authorized Investments and Diversification 15 Municipal Code Ordinance 2.70 - Investment Advisory Board 16 Municipal Code Ordinance 3.08 - Investment of Moneys and Funds 17 Listing of Approved Financial Institutions 19 Broker/Dealer Questionnaire and Certification 20 Investment Pool Questionnaire 24 Segregation of Major Investment Responsibilities 28 Glossary 29 1 City of La Quinta Investment Policy Executive Summary The general purpose of this Investment Policy is to provide the rules and standards users must follow in investing funds of the City of La Quinta. It is the policy of the City of La Quinta to invest all public funds in a manner which will provide a diversified portfolio with maximum security while meeting daily cash flow demands and the highest investment return in conformity to all state and local statutes. This Policy applies to all cash and investments of the City of La Quinta, La Quinta Redevelopment Agency and the La Quinta Financing Authority, hereafter referred in this document as the "City". The primary objectives, in order of priority, of the City of La Quinta's investment activity shall be: Safety of principal is the foremost objective of the investment program. Investments of the City of La Quinta shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. The investment portfolio shall be designed with the objective of attaining a market rate of return or yield throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. Authority to manage the City of La Quinta's investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish and implement written procedures for the operation of the City's investment program consistent with the Investment Policy. The Treasurer shall establish and implement a system of internal controls to maintain the safety of the portfolio. In addition, the internal control system will also insure the timely preparation and accurate reporting of the portfolio financial information. The adequacy of these controls will be reviewed and reported on annually by an independent auditor. 6 Investment responsibilities carry added duties of insuring that investments are made without improper influence or the appearance to a reasonable person of questionable or improper influence. The City of La Quinta maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions selected by the Treasurer to provide investment services will be approved by the City Manager subject to City Council approval. The Treasurer will be permitted to invest only in City approved investments up to the maximum allowable percentages and, where applicable, through the bid process requirements. Authorized investment vehicles and related maximum portfolio positions are listed in Appendix - Authorized Investments and Diversification At least two bids will be required of investments in government securities. Collateral ization will be required for Certificates of Deposit in excess of $100,000. Collateral will always be held by an independent third party with whom the City of La Quinta has a current custodial agreement. Evidence of ownership must be supplied to the City and retained by the City Treasurer. The City of La Quinta shall require that each individual investment have a maximum maturity of two years unless specific approval is authorized by the City Council. In addition, the City's investment in the State Local Agency Investment Fund (LAIF) is allowable as long as the average maturity does not exceed two years, unless specific approval is authorized by the City Council. The City's investment in Money Market Mutual funds is allowable as long as the average maturity does not exceed 60 days. The City of La Quinta will use the six month U.S. Treasury Bill as a benchmark when measuring the performance of the investment portfolio. The Investment Policies shall be adopted by resolution of the La Quinta City Council on an annual basis, The Investment Policies will be adopted before the end of June of each year. This Executive Summary is an overall review of the City of La Quinta Investment Policies. Reading this summary does not constitute a complete review which can only be accomplished by reviewing all the pages. 3 City of La Quinta Statement of Investment Policy July 1, 1996 through June 30, 1997 Adopted by the City Council on June 18, 1996 GENERAL PURPOSE The general purpose of this document is to provide the rules and standards users must follow in administering the City of La Quinta cash investments. II INVESTMENT POLICY It is the policy of the City of La Quinta to invest public funds in a manner which will provide a diversified portfolio with safety of principal while meeting daily cash flow demands with the highest investment return . In addition, the Investment Policy will conform to all State and local statutes governing the investment of public funds. III SCOPE This Investment Policy applies to all cash and investments of the City of La Quinta, City of La Quinta Redevelopment Agency and the City of La Quinta Financing Authority, hereafter referred in this document as the "City". These funds are reported in the City of La Quinta Comprehensive Annual financial Report (CAFR) and include: All funds within the following fund types: ► General ► Special Revenue ► Capital Project ► Debt Service ► Internal Service ► Trust and Agency ► Any new fund types and fund(s) that may be created. M IV OBJECTIVES The primary objective, in order of priority, of the City of La Quinta's investment activity shall be: 1. Safety Safety of principal is the foremost .objective of the investment program. Investments of the City of La Quinta shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio in accordance with the permitted investments. The objective will be to mitigate credit risk and interest rate risk. A. Credit Risk Credit Risk - is the risk of loss due to the failure of the security issuer or backer. Credit risk may be mitigated by: ► Limiting investments to the safest types of securities; ► Pre -qualifying the financial institutions, and broker/dealers, which the City of La Quinta will do business; and ► Diversifying the investment portfolio so that potential losses on individual securities will be minimized. B. Interest Rate Risk Interest Rate risk is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. Interest rate risk may be mitigated by: ► Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and ► By investing operating funds primarily in shorter -term securities. 2. Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands. Furthermore since all possible cash demands cannot be anticipated the portfolio should consist of securities with active secondary or resale markets. 5 3. Yield The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of least importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity with the following exceptions: ► A declining credit security could be sold early to minimize loss of principal; ► Liquidity needs of the portfolio require that the security be sold. V PRUDENCE The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in Probate Code Sections 16045 through 16054.. Section 16053 sets forth the terms of a prudent person which are as follows: Investments shall be made with judgment and care - under circumstances then prevailing which persons of prudence, discretion, and intelligence excerise in the professional management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. VI DELEGATION OF AUTHORITY Authority to manage the City of La Quinta's investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The City Manager or Assistant City Manager shall approve in writing all purchases and sales of investments prior to their execution by the City Treasurer. .1 VII CONFLICT OF INTEREST Investment responsibilities carry added duties of insuring that investments are made without improper influence or the appearance of improper influence. Therefore, the City Manager, Assistant City Manager, and the City Treasurer shall adhere to the State of California Code of Economic Interest and to the following: ► The City Manager, Assistant City Manager, and the City Treasurer shall not personally or through a close relative maintain any accounts, interest, or private dealings with any firm with which the City places investments, with the exception of regular savings, checking .and money market accounts, or other similar transactions that are offered on a non-negotiable basis to the general public. Such accounts shall be disclosed annually to the City Clerk in conjunction with annual disclosure statements of economic interest. ► All persons authorized to place or approve investments shall report to the City Clerk kinship relations with principal employees of firms with which the City places investments. VIII AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City of La Quinta maintains a listing of financial institutions which are approved for investment purposes. In addition a list will also be maintained of approved broker/dealers selected by credit worthiness, who maintain an office in the State of California. 1. Broker/Dealers who desire to become bidders for investment transactions must supply the City of La Quinta with the following: ► Current audited financial statements ► Proof of National Association of Security Dealers Certification ► Trading resolution ► Proof of California registration ► Resume of Financial broker ► Completion of the City of La Quinta Broker/Dealer questionnaire which contains a certification of having read the City of La Quinta Investment Policy The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. 7 The City Treasurer will also contact the following agencies during the verification process: ► National Association of Security Dealer's Public Disclosure Report File - 1-800-289-9999 ► State of California Department of Corporations 1-916-445-3062 All Broker/Dealers selected by the City Treasurer to provide investment services will be approved by the City Manager subject to City Council approval. The City Attorney will perform a legal review of the trading resolution/investment contract submitted by each Broker/Dealer. Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will be required to meet the following criteria in order to receive City funds for investment: A. Insurance - Public Funds shall be deposited only in financial institutions insured by the Federal Deposit Insurance Corporation B. Collateral - The amount of City of La Quinta deposits or investments not insured by agency of the federal government shall be 1 10% collateralized by securities' or 150% mortgages' market values of that amount of invested funds plus unpaid interest earnings. C. Size - The amount of City of La Quinta deposits or investments must be collateralized or insured by an agency of the federal government. D. Disclosure - Each financial institution maintaining invested funds in excess of $100,000 shall furnish corporate authorities a copy of all statements of resources and liabilities which it is required to furnish to the State banking or savings and loan commissioners as required by the California Financial Code. The City shall not invest in excess of $100,000 in banking institutions which do not disclose to the city a current listing of securities pledged for collateralization in public monies. IX AUTHORIZED INVESTMENTS AND DIVERSIFICATION The City Treasurer will be permitted to invest in the investments listed in the Appendix entitled - Authorized Investments and Diversification. X INVESTMENT POOLS There are three (3) types of investment pools: 1) state -run pools, 2) pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee i.e. County Pool; and 3) pools that are operated for profit by third parties. The City of La Quinta has an investment with the State of California's Treasurers Office Local Agency Investment Fund commonly referred to as LAIF. LAIF was organized in 1977 through State Legislation Section 16429.1, 2 and 3. Each LAIF account is restricted to a maximum investable limit of $20 million. In addition, LAIF will provide quarterly market value information to the City of La Quinta. On an annual basis the City Treasurer will submit the Investment Pool Questionnaire to LAIF. Also, prior to opening any new Investment Pool account, which would require City Council approval, the City Treasurer will require the completion of the Investment Pool Questionnaire.. The City does not have an investment with any other Investment Pool - County Pools or Third Party Pools. XI COLLATERALIZATION Collateral ization will be required for Certificates of Deposits. The type of collateral is limited to City authorized investments. 1. Certificates of Deposits under $100,000. The City Treasurer may waive collateralization of a deposit that is federally insured. 2. Certificates of Deposit over $100.000. The amount not federally insured shall be 1 10% collateralized by securities or 150% mortgages market value of that amount of invested funds plus unpaid interest earnings. Collateral will always be held by an independent third party with whom the City of La Quinta has a current custodial agreement. Evidence of ownership must be supplied to the City of La Quinta and retained by the City Treasurer. XII SAFEKEEPING AND CUSTODY All security transactions of the City of La Quinta shall be conducted on a delivery - versus - payment (DVP) basis. Securities will be held by a third party custodian designated by the City Treasurer and evidenced by safekeeping receipts. Deposits and withdrawls of money market mutual funds and LAIF shall be made directly to the to the entity and not to an investment advisor. Money market mutual funds and LAIF shall also operate on a DVP basis to be considered for investment. XIII INTEREST EARNING DISTRIBUTION POLICY Interest earnings is generated from pooled investments and specific investments. 1 . Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, La Quinta Redevelopment Agency and La Quinta Financing Authority and allocate interest earnings, in the following order, as follows: A. Payment to the General Fund of an amount equal to the total annual bank service charges as incurred by the general fund for all operating funds as included in the annual operating budget. B. Payment to the General Fund of a management fee equal to 5 % of the annual pooled cash fund investment earnings. C. Payment to each fund of an amount based on the average computerized daily cash balance included in the common portfolio for the earning period. 2. Specific Investments - Specific investments purchased by a fund shall incur all earnings and expenses to that particular fund. XIV MAXIMUM MATURITIES The City of La Quinta shall require that each individual investment to have a maximum maturity of two years unless specific approval is authorized by the City Council. In addition, the City's investment in the State Local Agency Investment Fund (LAIF) is allowable as long as the average maturity does not exceed two years, unless specific approval is authorized by the City Council. The City's investment in Money Market Mutual funds is allowable as long as the average maturity does not exceed 60 days. XV INTERNAL CONTROLS 10 The City Treasurer shall establish a system of internal controls to accomplish the following objectives: ► Safeguard assets; ► The orderly and efficient conduct of its business, including adherence to management policies; ► Prevention or detection of errors and fraud; ► The accuracy and completeness of accounting records; and, ► Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following: a. Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. b. Separation of transaction authority from accounting and record keeping. By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. C. Custodial safekeeping. Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for custodial safekeeping. d. Avoidance of physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. e. Clear deleaation of authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities as outlined in the Segregation of Major Investment Responsibilities appendices. f. Written confirmation or telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions should be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and the safekeeping 11 institution has a list of authorized signatures. Fax correspondence must be supported by evidence of verbal or written follow-up. g. Development of a wire transfer agreement with the City's bank and third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. In addition to the System of Internal Controls developed by the City, the Internal Controls shall be reviewed annually by the independent auditor. The independent auditors management letter comments pertaining to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditors letter. This response will also be directed to the City's Investment Advisory Board for their action. XVI BENCHMARK The investment portfolio shall be designed with the objective of' obtaining a rate of return throughout budgetary and economic cycles commensurate with the investment risk constraints and the cash flow needs of the City. Return on investment is of least importance compared to safety and liquidity objectives. The City of La Quinta will use the six month U.S. Treasury Bill as a benchmark when measuring the performance of the investment portfolio. XVII REPORTING STANDARDS SB564 section 3 requires a quarterly report to the Legislative Body of Investment activities. The City of La Quinta has elected to report the investment activities to the City Council on a monthly basis through the Treasurers Report. The City Treasurer shall submit a monthly Treasurers Report to the City Council and the Investment Advisory Board that includes all investments under the authority of the Treasurer. The Treasurers Report shall consist of a narrative of significant changes in cash balances and the following: No. Changes in investments from the previous month; ► A certification statement from the City Treasurer; ► Purchases and sales of investments; 12 ► Cost to market value comparisons of all investments by authorized investment category, except for LAIF which will be provided quarterly; ► Comparison of actual holdings to Investment Policy maximums; ► Twenty four (24) months history of cash and investments for trend analysis; ► Balance Sheet. XVIII INVESTMENT OF BOND PROCEEDS The City's investment policy shall govern bond proceeds and bond reserve fund investments. California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in accordance with bond indenture provisions which shall be structured in accordance with the City's investment policy. Arbitrage Requirement The US Tax Reform Act of 1986 requires the City to perform arbitrage calculations as required and return excess earnings to the US Treasury from investments of proceeds of bond issues sold after the effective date of this law. This arbitrage calculations may be contracted with an outside source to provide the necessary technical assistance to comply with this regulation. Investible funds subject to the 1986 Tax Reform Act will be kept segregated from other funds and records will be kept in a fashion to facilitate the calculations. The City's investment position relative to the new arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. XIX INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA The appendices include City of La Quinta Ordinance 2.70 entitled Investment Advisory Board Provisions. XX INVESTMENT POLICY ADOPTION 13 On an annual basis, the Investment policies will be initially reviewed by the Investment Advisory Board and the City Treasurer. The Investment Advisory Board will forward the Investment policies, with any revisions, to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City Treasurer to review the Investment policies and comments, prior to submission to the City Council for their consideration. The Investment Policies shall be adopted by resolution of the City of La Quinta City Council on an annual basis. The Investment Policies will be adopted before the end of June of each year. 14 3 E W E E 6 Ft I E 2 yi E i i n ' Q i m 5S '•� i�i ! . s C m V Q ® U G O yll! C4 0 iL I.. ................................ m E N n Qcc m t7! W W •� N m IL1 y'' a � l0 m y '� W m W �p N: iit iY iN iNj :Ili 'it: jVi Vi 'N :It 'v im 'Ili !v �N pN ill ji7 :v Ev ) ......_. -. ` ,.,. _....._.... ......................... :........_ ...__. ... ...a O p X� a i iv.0: :aWd S ;vi 'yt > m m ppp 'U_ iLL C C1c Zy 69 •C A y I'2 " E t:aa o T En oQ �' c: �i g E�os 43 LL lii le io; ipp• �i �� a iSu�i p iopp ,?• i41 _I 1 O c> y p oID (y c ° > m c� H T E I cEia o. a am xtD! U �c Oy a qi _C-tl {L C W W C N VJ N 2 E•`�-Z...� wn 'c. :ompz -' jC m� ''. IW Qpp i m 'O T m m Om i iLL 'v O €o : C " ID 4 ° LV lLLty. E`�i O! :W o�ggqqqq7777772 ym . c a c 0° v NIp , r L) LL o Sc I q ''y ro my �° c v c Blp�vB a E W "2 CD m :c `iy2 m Eits m' > im. ..0 O m2SJLL CS .E W `itl WWW W !a $ 16 o m 1 D T o ICE • m E ° _ > m� mi E. y m c; m fA d� m S m N fn0 f, LL LL LL tLLLLL `� i U �' �E I a �W ........r .. SV __E` y N ,,M I I (b ai,N, m s I C_ 4 Z d 0 � N 0 m ~ y m � E m 7 V1 E f obi$ EE and c� to « E E ~ 02 m o U Em Y q p j Emg� m«;... s W f O 0 ® C c� y 't5 >tl y aac O W O qc`�$a ° m y m u ° WC o � ra to OI cE O m a5 vE.9 p a•� C �.n 4q q N Z `� 92 �-F m mOD � ill ev .5 C7� q tmtl tsi m o y m `mho ° trD .9 1ec E m "l E� OM UE m c On m>v . ul L m -CC>, CD aN m +"•' W � y W a O W ° yn �c " " d C Eg�a�$ E� as i^ o- $ E� $ aQ v E a m ?� s c mmcoo. 8a W qo LL m E N ID 7 y III yk.-:3 pj Q �.Y C aLL y C [�5Cmcm� " C `r� tm V C C a x O Lm.r >E � m. tl .- N M O N tl> Q 10 c. ItK1@ (Vt�tly 11111 rtaal lururpl p el q to cdrl 1'a tri. 15 Chapter 2.70 INVESTMENT ADVISORY BOARD PROVISIONS Sections: 2.70.010 General Rules Regarding Appointment and Terms. 2.70.020 Board meetings and compensation. 2.70.030 Board functions. 2.70.010 General rules regarding appointment and terms. Except as set out below, see Chapter 2.06 for General Provisions. The Investment Advisory Board (the "board") is a standing board composed of seven (7) members from the public that are appointed by city council. La Quinta residency is preferred, but not a requirement for board members. Recruitment for members may be advertised outside of the city". Background in the investment field and/or related experience is preferred. Background information will be required and potential candidates must agree to a background check and verification. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters on the board. Such matters m.ay include, but are not limited to, changes in employment, changes in residence, or changes in clients. The Board members will serve for two year staggered terms beginning on July 1 of every other year, commencing July 1, 1993. Initially, two members will be appointed for two year terms and three members will be appointed for one year terms. These initial appointments will start their yearly calculations from July 1, 1993. 2.70.020 Board meetings and compensation. Board members will be reimbursed for meeting and related expenses at an amount of fifty dollars ($50) per meeting. Initially, the Board should meet once a month, but this schedule may be extended to quarterly meetings upon the concurrence of the Board and the City Council. The specific meeting dates will be determined by the Board members and meetings may be called for on an as needed basis. 16 Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS Sections: 3.08.010 Investment of city moneys and deposit of securities. 3.08.020 Authorized investments. 3.08.030 Sales of securities. 3.08.040 City bonds. 3.08.050 Reports. 3.08.060 Deposits of securities. 3.08.070 Trust fund administration. 3.08.010 Investment of city moneys and deposit of securities. Pursuant to, and in accordance with, and to the extent allowed by, Sections 53607 and 53608 of the Government Code, the authority to invest and reinvest moneys of the city, to sell or exchange securities, and to deposit them and provide for their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982) 3.08.020 Authorized investments. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to purchase, at their original sale or after they have been issued, securities which are permissible investments under any provision of state law relating to the investing of general city funds, including but not limited to Sections 53601 and 53635 of the Government Code, as said sections now read or may hereafter be amended, from moneys in his custody which are not required for the immediate necessities of the city and as he may deem wise and expedient, and to sell or exchange for other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part), 1982) 3.08.030 Sales of Securities. From time to time the city treasurer shall sell the securities in which city moneys have been invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the purchase for which the original purchase money may have been designated or placed in the city treasury. (Ord. 2 § I (part), 3.08.040 City bonds. Bonds issued by the city and purchased pursuant to this chapter may be canceled either in satisfaction of sinking fund obligations or otherwise if proper and appropriate; provided, however, that the bonds may be held uncancelled and while so held may be resold. (Ord. 2 § 1 (part), 1982) 3.08.050 Reports. The city treasurer shall make a monthly report to the city council of all investments made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982) 17 3.08.060 Deposits of securities. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to deposit for safekeeping, the securities in which city moneys have been invested pursuant to this chapter, in any institution or depository authorized by the terms of any state law, including but not limited to Section 53608 of the Government Code as it now reads or may hereafter be amended. In accordance with said section, the city treasurer shall take from the institution or depository a receipt for the securities so deposited and shall not be responsible for the securities delivered to and receipted for by the institution or depository until they are withdrawn therefrom by the city treasurer. (Ord. 2 § 1 (part), 1982 3.08.070 Trust fund administration. Any departmental trust fund established by the city council pursuant to Section 36523 of the Government Code shall be administered by the city treasurer in accordance with Section 36523 and 26524 of the Government code and any other applicable provisions of law. (Ord. 2 § 1 (part), 1982) LISTING OF APPROVED FINANCIAL INSTITUTIONS 1. Banking Services - Wells Fargo Bank 2. Custodian Services - Wells Fargo Bank Institutional Trust 3. Deferred Compensation - International City/County Management Association Retirement Corporation 4. Broker/Dealer Services - Merrill Lynch, Indian Wells, CA Dean Witter, Newport Beach, CA rrtith Barney, N Bal CA' 5. Government Pool - State of California Local Agency Investment Fund City of La Quinta Account La Quinta Redevelopment Agency No Changes to this listing may be made without City Council approval. 19 BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION 1 . Name of Firm: 2. Address: 3. Telephone: ( 4. Broker's Representative to the City (attach resume): Name: Title: Telephone: ( ) 5. Manager/Partner-in-charge (attach resume): Name: Title: Telephone: 6. List all personnel who will be trading with or quoting securities to City employees (attach resume) Name: Title: Telephone: ( ) ( ) 7. Which of the above personnel have read the City's investment policy? 8. Which instruments are offered regularly by your local office? (Must equal 100%) % U.S. Treasuries % BA's % Commercial Paper % CD's % Mutual Funds % Agencies (specify): % Repos % Reverse Repos % CMO's % Derivatives Stocks/Equities % Other (specify) : PXel 9. References -- Please identify your most directly comparable public sector clients in our geographical area. Entity Entity Contact Contact Telephone ( ) Telephone ( ) Client Since Client Since 10. Have any of your clients ever sustained a loss on a securities transaction arising from a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 1 1 . Has your firm or your local office ever been subject to a regulatory or state/ federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of securities? Have any of your employees been so investigated? If so, explain. 12. Has a client ever claimed in writing that you were responsible for an investment loss? Yes No If yes, please provide action taken Has a client ever claimed in writing that your firm was responsible for an investment loss? Yes No If yes, please provide action taken Do you have any current, or pending complaints that are unreported to the NASD? Yes No If yes, please provide action taken 21 Does your firm have any current, or pending complaints that are unreported to the NASD? Yes No If yes, please provide action taken 13. Explain your clearing and safekeeping procedures, custody and delivery process. Who audits these fiduciary responsibilities? Latest Audit Report Date 14. How many and what percentage of your transactions failed. Last month? % $ Last year? % $ 15. Describe the method your firm would use to establish capital trading limits for the City of La Quinta. 16. Is your firm a member in the S.I.P.C. insurance program. Yes If yes, explain primary and excess coverage and carriers. 17. What portfolio information, if any, do you require from your clients? 18. What reports and transaction confirmations or any other research publications will the City receive? 19. Does your firm offer investment training to your clients? Yes No 22 20. Does your firm have professional liability insurance. Yes No If yes, please provide the insurance carrier, limits and expiration date. 21. 22. Please list your NASD Registration Number. Do you have any relatives who work at the City of La Quinta? Yes No If yes, Name and Department 23. Do you maintain an office in California. Yes No� 24. Do you maintain an office in La Quinta or Riverside County? Yes No 25. Please enclose the following: • Latest audited financial statements. • Samples of reports, transaction confirmations and any other research/publications the City will receive. • Samples of research reports and/or publications that your firm regularly provides to clients. • Complete schedule of fees and charges for various transactions. 'CERTIFICATION' I hereby certify that I have personally read the Statement of Investment Policy of the City of La Quinta, and have implemented reasonable procedures and a system of controls designed to preclude imprudent investment activities arising out of transactions conducted between our firm and the City of La Quinta. All sales personnel will be routinely informed of the City's investment objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable risks associated with financial transactions conducted with our firm. By signing this document the City of La Quinta is authorized to conduct any and all background checks. Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of my knowledge. Broker Representative Date Title Sales Manager and/or Managing Partner* Date Title 23 INVESTMENT POOL QUESTIONNAIRE Note: This Investment Pool Questionnaire was developed by the Government Finance Officers Association (GFOA). Prior to entering a pool, the following questions and issues should be considered. SECURITIES Government pools may invest in a broader range of securities than your entity invests in. It is important that you are aware of, and are comfortable with, the securities the pool buys. 1. Does the pool provide a written statement of investment policy and objectives? 2. Does the statement contain: a. A description of eligible investment instruments? b. The credit standards for investments? c. The allowable maturity range of investments? d. The maximum allowable dollar weighted average portfolio maturity? e. The limits. of portfolio concentration permitted for each type of security? f. The policy on reverse repurchase agreements, options, short sales and futures? 3. Are changes in the policies communicated to the pool participants? 4. Does the pool contain only the types of securities that are permitted by your investment policy? INTEREST Interest is not reported in a standard format, so it is important that you know how interest is quoted, calculated and distributed so that you can make comparisons with other investment alternatives. Interest Calculations 1. Does the pool disclose the following about yield calculations: a. The methodology used to calculate interest? (Simple maturity, yield to maturity, etc.) b. The frequency of interest payments? c. How interest is paid? (Credited to principal at the end of the month, each quarter; mailed?) d. How are gains/losses reported? Factored monthly or only when realized? 24 REPORTING 1. Is the yield reported to participants of the pool monthly? (If not, how often?) 2. Are expenses of the pool deducted before quoting the yield? 3. Is the yield generally in line with the market yields for securities in which you usually invest? 4. How often does the pool report, and does that report include the market value of securities? SECURITY The following questions are designed to help you safeguard your funds from loss of principal and loss of market value. 1. Does the pool disclose safekeeping practices? 2. Is the pool subject to audit by an independent auditor? 3. Is a copy of the audit report available to participants? 4. Who makes the portfolio decisions? 5. How does the manager monitor the credit risk of the securities in the pool? 6. Is the pool monitored by someone on the board of a separate neutral party external to the investment function to ensure compliance with written policies? 7. Does the pool have specific policies with regards to the various investment vehicles? a. What are the different investment alternatives? b. What are the policies for each type of investment? 8. Does the pool mark the portfolio to its market value? 9. Does the pool disclose the following about how portfolio securities are valued: a. The frequency with which the portfolio securities are valued? b. The method used to value the portfolio (cost, current value, or some other method)? 25 OPERA TONS The answers to these questions will help you determine whether this pool meets your operational requirements: 1. Does the pool limit eligible participants? 2. What entities are permitted to invest in the pool? 3. Does the pool allow multiple accounts and sub -accounts? 4. Is there a minimum or maximum account size? 5. Does the pool limit the number of transactions each month? What is the number of transactions permitted each month? 6. Is there a limit on transaction amounts for withdrawals and deposits? a. What is the minimum and maximum withdrawal amount permitted? b. What is the minimum and maximum deposit amount permitted? 7. How much notice is required for withdrawals/deposits? 8. What is the cutoff time for deposits and withdrawals? 9. Can withdrawals be denied? 10. Are the funds 100% withdrawable at anytime? 11. What are the procedures for making deposits and withdrawals? a. What is the paperwork required, if any? b. What is -the wiring process? 12. Can an account remain open with a zero balance? 13. Are confirmations sent following each transaction? STA TEMENTS It is important for you and the agency's trustee (when applicable), to receive statements monthly so the pool's records of your activity and holding are reconciled by you and your trustee. 26 1. Are statements for each account sent to participants? a. What are the fees? b. How often are they passed? c. How are they paid? d. Are there additional fees for wiring funds (what is the fee)? 2. Are expenses deducted before quoting the yield? QUESTIONS TO CONSIDER FOR BOND PROCEEDS It is important to know (1) whether the pool accepts bond proceeds and (2) whether the pool qualifies with the U.S. Department of the Treasury as an acceptable commingled fund for arbitrage purposes. 1. Does the pool accept bond proceeds subject to arbitrage rebate? 2. Does the pool provide accounting and investment records suitable for proceeds of bond issuance subject to arbitrage rebate? 3. Will the yield calculation reported by the pool be acceptable to the IRS or will it have to be recalculated? 4. Will the pool accept transaction instructions from a trustee? 5. Are you allowed to have separate accounts for each bond issue so that you do not commingle the interest earnings of funds subject to rebate with funds not subject to regulations? 27 SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES Function Responsibilities Develop formal Investment Policy City Treasurer Recommend modifications to Investment Policy Investment Advisory Board Review formal Investment Policy and recommend City Manager and City Council action City Attorney Adopt formal Investment Policy City Council Review Financial Institutions & Select Investments City Treasurer Approve investments City Manager or Assistant City Manager Execute investment transactions City Treasurer Confirm wires, if applicable City Manager or Accounting Supervisor Record investment transactions in City's accounting records Accounting Supervisor Investment verification - match broker confirmation to City investment records Account Technician Reconcile investment records - to accounting records and bank statements - to Treasurers Report of investments Account Technician Security of investments at City Vault Security of investments Outside City Third Party Custodian Review internal control procedures External Auditor il GLOSSARY The purpose of this glossary is to provide the reader of the City of La Quinta investment policies with a better understanding of financial terms used in municipal investing. AGENCIES: Federal agency securities ASKED: The price at which securities are offered. BANKERS' ACCEPTANCE (BA): Short-term credit arrangements to enable businesses to obtain funds to finance commercial transactions. They are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance, the bank becomes primarily liable for the payment of the drafts at its maturity. An acceptance is a high-grade negotiable instrument. Acceptances are purchased in various denominations for 30, 60 or 90 days, but no longer than 270 days. The interest is calculated on a 360-day discount basis similar to treasury bills. Local agencies may not invest more than 40% of their surplus money in bankers acceptances. BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer. BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT (CD): Time deposits of a bank or savings and loan. They are purchased in various denominations with maturities ranging from 30 to 360 days. The interest is calculated on a 360-day, actual - day month basis and is payable monthly. COLLATERAL: Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMMERCIAL PAPER: S h o r t- t e r m unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, IBM, Bank America, etc. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City of La Quinta. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance -related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. 29 DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. The following is a listing: 1. FNMAs (Federal National Mortgage Association) - Used to assist the home mortgage market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. They are issued in various maturities and in minimum denominations of $10,000. Principal and Interest is paid monthly. 2. FHLBs (Federal Home Loan Bank Notes and Bonds) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage - lending institutions. They are issued irregularly for various maturities. The minimum denomination is $ 5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. The bonds are issued with various maturities and carry semi-annual coupons. Interest is calculated on a 360- day, 30-day month basis. 3. FLBs (Federal Land Bank Bonds) - Long- term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi-annual coupons. Interest is calculated on a 360- day, 30 day month basis. 4. FFCBs (Federal Farm Credit Bank) - Debt instruments used to finance the short and intermediate term needs of farmers' and the national agricultural industry. They are issued monthly with three- and six- month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid. 30 5. FICBs (Federal Intermediate Credit bank Debentures).- Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of $3,000 with a nine - month maturity. Interest is payable at maturity and is calculated on a 360-day, 30-day month basis. 6. FHLMCs (Federal Home Loan Mortgage Corporation) - a government sponsored entity established in 1970 to provide a secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Principal and Interest is paid monthly. Other federal agency issues are Small Business Administration notes (SBAs), Government National Mortgage Association notes (GNMAs), Tennessee Valley Authority notes (TVAs), and Student Loan Association notes (SALLIE- MAEs). FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $100,000 per deposit. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open -market operations. FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of .the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM: the central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages. The term "passthroughs" is often used to describe Ginnie Maes. 31 LAIF (Local Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $5,000, in multiples of $1,000 above that, with a maximum balance of $20,000,000 for any agency. The City is restricted to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one -quarter of one percent of the earnings. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment., MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase --reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer -lender to liquidate the underlying securities in the vent of default by the seller - borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, banders' acceptances, etc.) are issued and traded. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of all cash and securities under the direction of the City Treasurer, including Bond Proceeds. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity an depositions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) - registered securities broker -dealers, banks and a few unregulated firms. 32 RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO): A repurchase agreement is a short-term investment transaction. Banks buy temporarily idle funds from a customer by selling U.S. Government or other securities with a contractual agreement to repurchase the same securities on a future date. Repurchase agreements are typically for one to ten days in maturity. The customer receives interest from the bank. The interest rate reflects both the prevailing demand for Federal funds and the maturity of the repo. Some banks will execute repurchase agreements for a minimum of $100,000 to $500,000, but most banks have a minimum of $1,000,000. REVERSE REPURCHASE AGREEMENTS - A reverse repurchase agreement is the opposite of a repurchase agreement. The City loans a security to a bank in exchange for cash. The City agrees to pay off the loan with interest on a future date. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMAS, SLMA, etc.) And Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative -based returns) into their debt structure, Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the Shape of the yield curve. SURPLUS FUNDS: Section 53601 of the California Government Code defines surplus funds as any money not required for immediate necessities of the local agency. The City has defined immediate neccesities to be payment due within one week. TREASURY BILLS: Issued weekly with maturity dates up to one year. They are issued and traded on a discount basis with interest figured on a 360-day basis, actual number of days. They are issued in amounts of $10,000 and up, in multiples of $5,000. They are a highly liquid security. TREASURY BONDS: Long-term coupon - bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. 33 TREASURY NOTES: Medium -term coupon - bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker - dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. UNIFORM PRUDENT INVESTOR ACT: The State of California has adopted this Act. The Act contains the following sections: duty of care, diversification, review of assets, costs, compliance determinations, delegation of investments, terms of prudent investor rule, and application. YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par of plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. 34 ` cA • z v � 44 C� `1wr `y OF TNT INVESTMENT ADVISORY BOARD Meeting Date: September 11, 1996 TITLE: Month End Cash Report - September 1996 BACKGROUND: Correspondence & Written Material Item A This cash report is not a complete Treasury Report (exclude petty cash, deferred compensation and fiscal agent balances, ) but would report in a timely fashion selected cash balances. RECOMMENDATION: Information item only. Jobn M. Falcbn6r, Finance Director City of La QOnta Month End Cash Report - See Footnote September 30, 1996 Wells Fargo Wells Fargo Wells Fargo City RDA Description Money Market LAIF Investments Total --Checking_Housing Beginning Balance - 9127/96 (531,744.48) 26,981.93 88,155.46 _LAIF 4,596,426.11 4,468,886.55 9,898,254.34 18,546,959.91 Deposits Daily Deposit 65,636.87 65,636.87 Deposited Return Item (290.50) (290.50) Transfers Disbursements Void Check #26276 30.00 30.00 Ending Balance per books (531,714.48) 26,981.93 153,501.83 4,596,426.11 4,468,886.55 9,898,254.34 18,612,336.28 Add Back - Accts Pay Chks 10/3/96 546,457.07 546,457.07 Adjusted Balance 14,742.59 26,981.93 153,501.83 4,596,426.11 4,468,886.55 9,898,254.34 19,158,793.35 Estimated Interest Accruals May June 12,512.00 12,512.00 July 27,494.00 38,914.00 22,816.00 89,224.00 August 29,447.00 .32,950.00 30,763.00 93,160.00 September 22,519.00 20,282.00 48,570.00 91,371.00 Adjusted Balances after accruals 1 14 742.59 1 26 981.93 1 153 501.83 14 675 886.11 4,561,032.55 10 012 915.34 19 445 060.35 Investment Class 195,226.35 9,236,918.66 10,012,915.34 119,445,060.35 Percentages 1.0040% 47.5026% 51.4934% 100.00% Footnotes: The following report is a special purpose report which has been prepared at the request of the Investment Advisory Board. This report was created because the Finance Department cannot prepare the Treasurers report for the month end before the 2nd Wednesday of each month (e.g. June report for the July meeting). As a result, the IAB does not receive the Treasurers Report until approximately 1 1/2 months after the date of the report (e.g. June report for the August meeting). The report is prepared on a monthly basis from the Daily Cash Report. The purpose of this report is for staff to project daily cash needs and invest excess cash. This report does not include all investments of the City, RDA and Financing Authority. Specifically excluded from this report are the Petty Cash , Deferred Compensation, and Fiscal Agent accounts. These accounts are included in the Treasurers Report. In addition, the percentage numbers in this report are for information only. These percentages should not be used to compare the maximum allowable percentages allowed in the investment policy because this report does not include all investments and is not prepared from the reconciled book balances. V j��IV�MI�nu OF TNT' INVESTMENT ADVISORY BOARD Meeting Date: September 11, 1996 TITLE: Letter from Ken AI -Imam, C.P.A. Conrad & Associates, L.L.P. the City Auditors Regarding Treasurer's Office Procedures BACKGROUND: Correspondence & Written Material Item B At the September 11, 1996 Investment Advisory Board meeting, the Board asked that Staff have the Auditors review the procedures and bring this item back at the October meeting with the Auditors comments (Attachment No. 1). Attached please find a letter from Mr. Ken AI -Imam, CPA and Partner from Conrad & Associates, CPA's regarding this item. These procedures provide guidance in making investment decisions in daily investment activity and preparation of Monthly Treasurer's Reports. RECOMMENDATION: His letter did not include any changes or suggestions for staff to address. yJonMU.�Falcovner, Finance Director CONRAD �ASSOCIATES, L.L.P. A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS John M. Falconer, C.P.A. Director of Finance City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, California 92253 Dear John: CERTIFIED PUBLIC ACCOUNTANTS 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92614 (714) 474-2020 September 27, 1996RECEIVED 1996 INANCE DEPT We have reviewed the outlined duties of the City of La Quinta Finance Department as they pertain to the preparation of the Treasurer's report and the processing of investment transactions. Internal controls reduce, but do not eliminate, the risks of misstatement and defalcation. We noted that the procedures set forth in this outline contain many of the internal control and segregation of duties features recommended for those duties. Please give me a call if there are any further questions regarding these matters. Sincerely, CONRAD & ASSOCIATES, L.L.P. Ken Al -Imam, C.P.A. Partner MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION PREPARATION OF MONTHLY TREASURER'S REPORT City of La Quinta Preparation of Monthly Treasurer's Report Treasurers Office Activity Report The Financial Services Assistant is responsible for the preparation of all pages of the monthly Treasurer's Report, except for the Balance Sheet 1 which is prepared by the Accounting Supervisor. The Treasurer is responsible for the review, approval and submission of the Treasurer's Report. 2 The followings records are used in the preparation of the monthly Treasurer's Report: Wall Street Journal Monthly Custodian Account Printout & Statements Monthly Bond Trustee Statements Monthly Bank Statements Monthly Deferred Compensation Statements Monthly LAIF Statement Balance Sheet Financial Accounting Services Treasurer Supervisor Assistant Secretary X X X At month end, the Treasurer clips the Wall Street 3 Journal page with Government Security market values and forwards to Financial Services .Assistant. Holdings X At month end the Treasurer, via modem, prints out (1) the holdings, and (2) the activities for the month from the City custodian. The Treasurer compares the ending balance to the daily cash 4 report for the end of the month and variances investigated. The reports are then forwarded to the Financial Services Assistant. Note: the Treasurer also receives a hard copy report 10 days after the end of the month. Holdings X The Financial Services Assistant enters the purchases and sales listed in the City custodian 5 printouts into the Treasurer's Report. The Financial Services Assistant also enters the month end holdings into the Treasurer's Report from the City custodian printouts. Activity & Holdings X The Financial Services Assistant receives the monthly account statements from the bond 6 trustees typically 10 days after the end of the month. X The Financial Services Assistant summarizes the monthly transactions from each bond issue sub -account into a spreadsheet. This spreadsheet 7 shows the interest that was earned, and disbursements, debt service payments, and transfers between sub -accounts that were made. The Financial Services Assistant enters the month end holdings into the Treasurer's Report. Holdings X The Financial Services Assistant enters the mutual fund activities for each bond issue into a 8 spreadsheet. This spreadsheet calculates the interest rate that was earned. The interest rate earned is entered into the Treasurer's Report. Holdings X City of La Quinta Preparation of Monthly Treasurer's Report Treasurers Office Financial Accounting Services Activity Report Treasurer Supervisor Assistant Secretary The Financial Services Assistant enters the 9 purchases and sales that were made for government investments and mutual funds from the bond funds into the Treasurer's Report. Activity X The Treasurer compares the LAIF balances 10 reflected on the LAIF spreadsheet and the balances reported on the Daily Cash Report at month end. X The Treasurer forwards a copy of the LAIF spreadsheet to the Financial Services Assistant. The Financial Services Assistant records the LAIF 11 purchases and sales and quarterly interest activity in the Treasurer's Report. In addition, the Financial Services Assistant receives a report directly from LAIF with account balances. Activity X X The Financial Services Assistant records the month end LAIF balances in the Treasurer's Report. For quarter end months ( September, December, March and June ) interest rate and 12 market value information is reflected in the Treasurer's Report. In addition to the LAIF spreadsheet, LAIF also sends a monthly holdings report. Holdings X The Financial Services Assistant, on a monthly 13 basis, reconciles the bank accounts and enters the book and bank balances into the Treasurer's Report as well as any interest rate information. Holdings X The Financial Services Assistant, on a monthly 14 basis, enters the deferred compensation balance and interest rate information into the Treasurer's Report. Holdings X The Financial Services Assistant compares the ending cash as reflected in the month end holdings, month end investments by type, month 15 end fund summary and month end trial balance to ensure that all of the ending amounts are in agreement. X The Financial Services Assistant calculated the 16 average interest rate and average maturity of the portfolio. Holdings X The Financial Services Assistant enters the six 17 month Treasurer's Bill Benchmark from the Wall Street Journal. Holdings X After all cash entries are made for the month the Accounting Supervisor prepares the monthly trial 18 balance spreadsheet for the City, RDA, and Financing Authority. A copy of this page is forwarded to the Financial Services Assistant. Balance Sheet X The Financial Services Assistant records all of the cash balances from the accounting software into 19 the fund summary section of the Treasurer's Report. The Financial Services Assistant reconciles the cash balances between these two reports and variances investigated. Fund Balances X City of La Quinta Preparation of Monthly Treasurer's Report Treasurers Office Activity Report The Financial Services Assistant updates the 20 monthly summary of cash by investment type in the Treasurers Report. Fund Balances 21 The Financial Services Assistant determines if the investments are surplus or non -surplus funds. Holdings The Financial Services Assistant updates the surplus worksheet by subtracting from total actual 22 funds the restricted investments, negative bank account balances, and accounts payable payments to arrive at surplus funds. Actual and Surplus Funds Accounting Treasurer Supervisor The Financial Services Assistant updates the Treasurer's Report Authorized Investments and Diversification page. Any exception that is noted 23 should be brought to the Treasurers attention. If the Financial Services Assistant and Treasurer do not agree on the exception then the City Manager Authorized Investments should be consulted. and Diversification X The Financial Services Assistant, in consultation with the Treasurer, updates the Treasurer's Report 24 cover page showing the increase and/or decreases in the investment types and the reason for the changes. I Treasurer's Cover Page The Financial Services Assistant forwards a copy 25 of the Treasurer Report to the Treasurer consisting of the following: Treasurers Cover Letter Authorized Investments And Diversification Summary of Holdings Summary of Investment Activities Reconciliation of Actual and Surplus Funds Distribution of Cash & Investments & Balances Trial Balance for City, RDA and Financing Authority The Treasurer reviews the Treasurer's Report and returns the document for corrections, if any, to the 26 Financial Services Assistant. After any corrections have been made the Treasurer signs and dates the report and forwards the report to Department Secretary. The Department Secretary prepares a staff report and attaches the Treasurer's Report for the Investment Advisory Board Agenda. The 27 Treasurer signs the staff report and the Treasurer's report is included in the agenda. For the City Council agendas, the Department Secretary prepares an Agenda Item Processing Form (AIPF) and attaches the Treasurer's Report. X Financial Services Assistant Secretary 11 X R X X F3 X City of La Quinta Preparation of Monthly Treasurer's Report Treasurers Office Activity The Financial Services Assistant forwards the monthly investment activity sent by LAIF to the 28 Department Secretary who prepares a staff report for the Investment Advisory Agenda. The Treasurer signs the staff report which is included in the agenda. Financial Accounting Services Report Treasurer Supervisor Assistant Secretary DAILY INVESTMENT ACTIVITY City of La Quinta Daily Investment Activity Treasurers Office Activi The Treasurer receives a printout of bank activity from the bank on-line system (ACTION) 1 at 7:00 AM each morning. The Treasurer performs a general review of daily printout of bank activity from the bank 2 on-line system (ACTION) and forwards to the Account Technician. 3 The Account Technician reviews the ACTION report to ensure prior days activities were posted by the bank as follows: Deposits Checks that have cleared Interbank account transfers Outgoing wires Trustee book transfers Custodian withdrawals 4 The Account Technician prepares a daily cash report for the following accounts: General Bank Account Housing Bank Account Money Market Bank Account Local Area Investment Fund _ City Local Area Investment Fund _ RDA Investments The Department Secretary prepares the daily deposit after reconciling prior days cash 5 receipts. Two deposit slips are prepared daily - one for cash and one for checks. The two deposits are placed into sealed bags for daily pickup by Brinks. The Department Secretary gives the Account Technician an adding machine tape with the 6 date and amount of each deposit for entry into the daily deposit report. The Department Secretary gives the deposit bags to the Account Clerk. The Account Clerk makes an entry into the Brinks Customer receipt book. The cash 7 receipts are deposited into the Money Market Account for maximum earnings. In addition to the normal daily cash receipts the Account Technician records the following 8 sources of cash into the daily cash report from time to time from the ACTION report: Housing Program lock box collections Investment Earnings State of California wires Incoming wires Parking Violations deposits Voided checks Misc Service fee credits 9 The Account Technician enters the disbursements into the daily cash report with the estimated date of release. Disbursements consist of the following: Regular accounts payable checks Emergency checks Payroll Check ACH's Payroll tax wires Outgoing wires Misc Service fee debits The Account Technician adds back to available cash the regular accounts payable checks and outgoing wires. Regular accounts payable checks and outgoing wires will be released 10 and cash withdrawn when due. Regular accounts payable checks, emergency checks, outgoing wires, payroll checks and direct deposits are reported to the Council on the Demand Register. The Account Technician prints out three copies of the daily cash report and distributes the 11 reports as follows: Account Technician Accounting Supervisor - Approves and forwards to Treasurer Treasurer - Approves, reviews and files The Account Technician forwards the daily ACTION report to the Financial Services 12 Assistant performing the monthly bank reconciliation. The Treasurer receives the Daily Cash Report by 9:00 A.M. which has been initialed by the 13 Account Technician and the Accounting Supervisor 14 The Treasurer reviews the Daily Cash Report. The basic investment strategy is as follows: The checking account is reviewed to ensure if adequate funds are available for the payment of bills. The Treasurer should review for negative amounts in the checking 15 account to determine if transfers should be made to cover checks that have been released. When considering transfers, the Treasurer should compare the checking account cash available to the ACTION cash available to determine cash float. i.e. outstanding checks. Financial Accounting Services Account Account Treasurer Supervisor Assistant Technician Secretary Clerk X X X X X X X X X X X X X X X City of La Quinta Daily Investment Activity Treasurers Office Activity If funds are needed in the checking account the Treasurer will determine if adequate funds are available in the money market account. If funds are available the Treasurer will 16 perform a transfer from the money market account to the checking account by preparing a deposit slip for the checking account and a withdrawal slip for the money market account. This must be done by 10:30 A.M. for same day credit. The Treasurer will give the deposit slip for the checking account and the withdrawal slip for 17 the money market account to the Secretary. The Secretary will place the two slips into a sealed bag for pickup by Brinks and give the bag to the Account Clerk who logs the bag into the Brinks Customer receipt book. If the 10:30 A.M. Brinks pickup deadline is not met, the Treasurer can physically deliver the deposit and withdrawal slip to the bank, call the local bank branch and make a telephone 18 transfer or call teletransfer services. The Treasurer and City Manager may make telephone transfers. The latter two methods will count toward the three (3) withdrawal and three (3) deposit monthly maximum in the money market account. If funds are not available in the money market account, the Treasurer will contact the Local Agency Investment Fund and request a withdrawal. In order to receive same day credit 19 LAIF must receive the request by 9:30 AM.The Treasurer contacts LAIF in Sacramento and provides their representative with the amount of the request, Bank account number, and Personal Identification Number. LAIF will only transfer funds to bank accounts on file. Future dated LAIF withdrawal requests may be made 10 days in advance The Treasurer identifies whether the LAIF funds are deposited into the Checking account or Money Market Account and whether the withdrawal will be from the City or Redevelopment LAIF account. LAIF provides the Treasurer a trade confirmation number. 20 In the absence of the Treasurer, the City Manager may make LAIF withdrawals and deposits. The Treasurer notifies the Account Technician of the withdrawal. A copy of the daily cash report is given to the Account Technician that states which LAIF accounts were decreased 21 and whether the checking account was increased or the money market account was increased. This information is then updated on the next day daily cash report by the Account Technician. The Treasurer would transfer LAIF funds into the checking account to pay bills. The Treasurer would transfer LAIF funds into the Money Market Account to pay for investments, 22 wires, or book transfers. Investments would be made by our Custodian as authorized by the Treasurer through the Trade Settlement Instruction/Authorization Form, wires would be made through teletransfer procedures, and book entries would be approved by the City Manager and City Treasurer and made by authorized bank personnel. The Treasurer will determine if there is excess funds in the money market account. The Treasurer will first determine if funds are needed in the checking account. If funds are 23 needed a transfer to the checking account as previously described will be made. If excess funds are still available a transfer funds to Local Agency Investment Account (LAIF) will be made. The Treasurer will contact the State of Cailifornia LAIF office by 9:30A.M. to advise it of a 24 LAIF transfer request. The Treasurer will provide LAIF with the amount ,and the LAIF account number to credit. LAIF will provide the Treasurer with a confirmation number. LAIF transfers may be made 10 calendar days in advance. The Treasurer will call the Wells Fargo toll free LAIF phone number by 11:00 A.M. and 25 provide the date, municipality name, person authorizing transfer, bank account number to be debited, amount, LAIF account number, and LAIF confirmation number to Wells Fargo personnel. The Treasurer then writes the information on the daily cash report and forwards a copy to 26 the Account Technician who enters this transaction in the next days daily cash report. The Treasurer logs the deposit in the LAIF spreadsheet. A copy of the spreadsheet, which 27 records all LAIF activity, is given to the Financial Services Assistant who prepares the Treasurer's Report. on a monthly basis If securities are purchased, the Treasurer should determine the type of investment and maturity in accordance with the City investment policy. A separate file for each transaction 28 will be created. The Treasurer will obtain the approval of the City Manager before commencing the purchase. A copy of the file is given to the Accounting Supervisor. The Treasurer will next obtain three bids from broker/dealers for the investments to be 29 obtained. The Treasurer will instruct the lowest successful broker/dealer to deliver securities to the City custodian on the settlement date. The Treasurer will receive a copy of the Bloomberg screen printout from the broker/dealer the same day and will receive a trade confirmation several days later from the successful 30 broker/dealer. The Treasurer will take information off the Bloomberg screen printout and prepare a trade settlement instruction/authorization form which is faxed to the City custodian. Financial Accounting Services Account Account Treasurer Supervisor Assistant Technician Secretary Clerk X X X X X X X X X X City of La Quinta Daily Investment Activity Treasurers. Office Activity The Custodian will automatically withdraw the funds from the money market account and 31 deliver the securities into the custodian account. The Treasurer will review the ACTION report that is received the next day to ensure that the funds that have been withdrawn match the amount reported on the trade settlement by 32 the custodian. On the settlement date the Treasurer will forward the Account Technician information on this investment purchase. The Account Technician will enter the investment purchase into the daily cash report by decreasing the money market account and increasing the investment account on the next business day cash report. The Treasurer will inquire through modem into the bank trust account software and print out a copy of the security held in the City of La Quinta account by the City of La Quinta 33 custodian. The Treasurer may also able to inquiry through modem of the pending trade prior to settlement if adequate time between the purchase and settlement dates exist. The investment policy has a buy and hold investment strategy, therefore, the sale of investments is not anticipated. If the sale of investments before maturity is required it will 34 be done to meet liquidity needs or because of diminishing credit rating. All sale of investments before maturity require the prior approval of the City Manager. In addition, all sales require disclosure to the Investment Advisory Board in a manner that will clearly identify such sales. The Treasury will contact the three broker/dealers to obtain bids for the sale of investments before maturity. The Treasurer will accept the highest bid. The Treasurer will 35 receive a copy of the Bloomberg screen printout. The Treasurer will take information off the Bloomberg screen and prepare a trade settlement instruction/authorization form which is faxed to the City custodian. The Trade Settlement Instruction/Authorization gives the settlement date. The Custodian 36 will release the City Investments when the cash is received from the Broker/Dealer. After the transaction takes place the cash is transferred to the City Money Market Account. 37 38 If no future trade is done that will settle on the day the previous investment matures, the cash received will be transferred by the custodian to the money market account. investment matures, the difference in prices will either be sent to or forwarded from the 39 money market account by the Custodian. The Treasurer must ensure that funds are available in the money market account if the new investments cost more than the matured investments. Financial Accounting Services Account Account Treasurer Supervisor Assistant Technician Secretary Clerk